Thursday, October 2, 2014

Affordable housing

It would be impertinent to attempt to deal with the issue of affordable housing in a single blog. However,  there are a few matters that I think could be discussed as this becomes ever more pressing issue and  one that will play an important part of the debate between the parties leading up to the 2015 General Election.

At the Conservative Party conference the Prime Minister found it  opportune to announce the discounting of  100,000 new homes that will also be  free of obligations  relating to energy efficiency. CIL, or other financial contributions (under s.106) that are needed to provide local infrastructure and  housing  at affordable rents.

The Conservative Party might well be in tune with the majority of voters in concentrating on home ownership  and  being convinced that the majority of homeowners will vote for them.   The exemption from the future zero carbon homes requirement  ignores the importance of 'affordable living' (based on lower fuel bills) in an attempt to get more people onto the ladder of home ownership. This is just the most recent attempt to make home ownership more affordable following on from the Funding for Lending and Help to Buy schemes which, together with the bank of 'mum and dad' have  helped to fuel the national increases in house prices.   Government  is increasingly  spending taxpayers money on subsidising the purchasing of houses being made less affordable by the subsidies.

It was Mr Pickles  who introduced a  scheme whereby housing associations and other providers can bid for a share of £400m in low-cost loans to build up to 10,000 new homes during 2015 to 2018. They will mainly consist of one- and two- bedroom flats.  Landlords must then make the homes available for rent at below-market rates for a minimum of seven years. This fixed period will give tenants the chance to save up for a deposit and get ready to buy their own home. A welcome but tiny initiative that uses the inflated land/housing costs as its datum and holds out the bait of home ownership.

Meanwhile, rents in the private sector  are also increasing as tenants are  having to  pay more for less space  (obviously a trend  that is more prevalent  in property hot spots).

To some extent the cost of  housing will be affected by  the cost of supplying new houses and any discussion on affordability should  include the cost of the components of building a dwelling (land, materials and labour) and then the components of the available finance. On the supply side there have been rises in the cost of both materials and labour but not  to the extent that would create a price bubble.  If  a house was built on land at agricultural value the land component would be in the order of £800  and not £80,000 that is the average cost of a single plot  in the south-east and  other areas with a buoyant economy. The 100  fold increase is largely down to the  desire and ability to pay -  which is  influenced by subsidies from government and parents. Incidentally, the benefit to parents is in maintaining the price of existing houses, including those owned by them.   It seems obvious, and it is part of the campaign to build new settlements ( increasingly referred to as garden cities), that by discounting the land value new housing can be built at lower prices and there would still be surplus for  the provision of physical and  social infrastructure.

While Government  does nothing to interfere with the market for housing land,  housing has probably reached the limits of affordability without  the scale of subsidies appearing to be politically unacceptable. In these circumstances the Government  should not be attempting to reduce standards but focusing attention on the need for  attractive smaller dwellings.  Small dwellings  use less materials (and less  transport and embedded carbon) and less labour,  but not necessarily less land if garden areas are part of what would make them attractive to those downsizing from larger properties. However, smaller dwellings would be cheaper and therefore more affordable and cheaper to furnish and heat. They lend themselves to terracing that is the most energy-efficient form of housing, especially if built with  south facing roofs and windows for solar gain.   Downsizing  to such developments at scale would be more likely to occur  is built as  in-filling and urban extensions rather than new settlements.  Larger dwellings would be released into the market and in private and social rental sectors.

My contention is that the housing models including  a predominantly3 and 4 bedroomed detached dwellings  should be regarded as intrinsically  unsustainable  (unable to benefit from the presumption in favour of sustainable development In the National Planning Policy Framework)  and unaffordable  on social, economic and environmental grounds. The Government should be concentrating on ways to incentivise the subdivision of larger dwellings.  We should be looking at  how housing  can be made 'sustainable'  and would  likely find that  socially inclusive housing that minimises its environmental impact would also be the most affordable -  win, win, win.

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